Compute the amount in the bonus pool

Assignment Help Finance Basics

Reference no: EM131410705

Jordan Brothers recently instituted a bonus plan to pay its executives. The plan specifies that net income must exceed $200,000 before any bonus payments are made. Cash in the amount of 10 percent of net income in excess of $200,000 is placed in a bonus pool, which is to be shared evenly by each of the executives. Ignore income taxes, and assume that the bonus payment is not included as an expense in the calculation of net income.

a. Briefly describe why a company would institute a bonus plan, and compute the amount in the bonus pool if Jordan Brothers shows net income of $300,000. Prepare the journal entry that would be recorded to reflect the bonus liability at the end of the year.

b. How much is in the bonus pool if Jordan Brothers shows net income of $180,000? Assume that Jordan Brothers is being sued for $60,000 as of the end of the year. The company's legal counsel believes that there is an 80 percent chance that Jordan will lose the suit and that the entire $60,000 will have to be paid. Assume also that the suit was ignored when the $180,000 net income was computed. Why might Jordan's management wish to accrue the loss from the suit in the current year instead of simply disclosing it?

Reference no: EM131410705

Questions Cloud

Formulate given problem as a two person zero sum game : Formulate this problem as a two-person, zero-sum game, and then determine which strategy the respective manufacturers should use according to the minimax criterion.

Compute the cash received by southwest : Explain why Southwest does not recognize revenue when it receives the payment from its customers.

Calculate the voltage across : Three capacitors (3.94, 5.98, and 12.0 μF) are connected in series across a 49.0 V battery. Calculate the voltage across the 3.94 μF capacitor.

Write a senior project summary paper : Provide a description of your selected topic (i.e., health care trend) and a thesis statement. Identify the organization that you have chosen to address, including why the issue of your selected topic is important to the health care administrators..

Compute the amount in the bonus pool : Briefly describe why a company would institute a bonus plan, and compute the amount in the bonus pool if Jordan Brothers shows net income of $300,000. Prepare the journal entry that would be recorded to reflect the bonus liability at the end of th..

What is the purpose of wires in a circuit : What is the purpose of wires in a circuit? Why do we use wires to connect power supplies to resistors or other objects on a circuit board? Why can't we just use power supplies and resistors? (short answer question)

Equation to find the equivalent resistance : What is the equation to find the equivalent resistance, Req, of two resistors in series, R1 and R2? (choose one of the four options)

What share of population is in the labor force : What's the unemployment rate? What share of population is in the labor force? Create a pie chart that divides the adult population into these three groups.

Contemporary trends in healthcare : Its constant changes are a result of continuing trends in regulation, policy, patient and provider advocacy efforts, as well as increasingly sophisticated technology and industry benchmarking guidelines.

User Account

All Pages